Waging War On Wal-Mart
George Will‘s piece in the current Newsweek, “Waging War On Wal-Mart” argues that
Zoning and other laws used to block Wal-Marts from opening are, in effect, tariffs serving domestic protectionism. Talk about protecting “a sense of community” often is avarice masquerading as altruism. It is rent-seeking—the use of government to confer economic advantages—tarted up as political philosophy.
Agreed. Will details the many advantages conferred by the Bentonville behemoth including
procurement and labor practices that, according to the McKinsey consulting group, made Wal-Mart responsible for about 25 percent of the nation’s astonishing productivity increases in the 1990s. The low prices made possible by these practices have made Wal-Mart a significant contributor to low inflation. Warren Buffett says Wal-Mart has contributed more than any other company to today’s economic vigor.
Fortunately, as with most attempts to circumvent overwhelming market pressures, a workaround is already underway:
In the past century, arms control, another liberal passion, limited the number of certain nations’ battleships. The result? The rise of pocket battleships—ships with hull sizes just small enough to not count as battleships, but packing the wallop of battleships. Wal-Mart has opened a 99,000-square-foot store to comply with an anti-Wal-Mart law banning stores larger than 100,000 square feet.
No word on whether Will called for more troops…
And we all know what happened to those pocket battleships.
Regulation slows innovation–one of the main themes of the welfare state era. I get the feeling that the ‘coasters’ don’t like Wal-Mart because they see it as too ‘red state.’ Such prejudices might lead to irrational over-regulation. Costco sells more upscale merchandise than Wal-Mart, and doesn’t get criticized by the chattering classes.
I’ve always wondered at that. I got an anti-Wal Mart screed from someone who I know shops at Costco–but the perception is that Costco is “virtuous,” but Wal-Mart is dirty, lower-class, and full of (as the bumper stickers put it) “cheap plastic shit.”
It definitely takes more money to shop at Costco, because one is forced to buy six months’ worth of whatever-it-is. So when the liberal Upper Crust buys stuff at Costco they can save money on individual items (at least on a per-unit basis)–but still retain their class snobbery.
The knock on Wal-Mart is really very simple–the evil of Capitalism in its purest form: more capital means inherantly unfair competitive advantage.
Tom Tarpy’s IGA in Nowhereville and Bill Jenkins’ hardware store in East Overshoe can’t cut prices below the Wal-Mart just built out in the cheap farmland between the two towns. They don’t have the size and the capital to do so. So, they go out of business. Well, that’s the breaks.
And even though downtown Nowhereville and East Overshoe are largely boarded up without the IGA & the Hardware Store, everybody can go to work at Wal-Mart, wear blue vests stencilled with How May I Help You? (part of those great productivity labor policies–you can now get the same question both coming and going!), and get great prices on things largely made with starvation labor in China.
That’s just great. The only problem is, when everybody in Nowhereville and East Overshoe works at Wal-Mart, the company can’t sustain the gross which policy dictates, and the Wal-Mart has to close. Leaving Nowhereville and East Overshoe largely unemployed ++and++ without a food and hardware store.
So much for the economic vigor in East Overshoe and Nowhereville. Shanghai and New Delhi, in case you hadn’t noticed, are going great guns.
Joseph,
The only problem with your analysis is that there are thousands of Wal-Marts across the country, the franchise has been booming for more than a generation, and the US continues to have the strongest economy on the planet.
Not in East Overshoe and Nowhereville. Go ask the company how many stores they have closed in little places like that. We have plenty of them here in Ohio.
Wal-Mart’s relation to such places is essentially short-term and predatory, like ore-mining, however successful, and even benificial, it might be in larger markets on the fringes of metro areas. The land is cheap to rent, the stores are cheap to build and run, and they equally cheap to close and write off for a net profit, once the economic base of a small town has been plundered.
But could you not make the same argument for Tom Tarpy’s IGA and Bill Jenkins’ hardware stores?
Did they close up shop once the economic climate of changed, making it more difficult for them to plunder the denizens of these small towns?
My experience with small town Wal-Marts is that they move to ever-larger stores every few years. They kill off the other five-and-dime type stores but hardware stores and whatnot survive. What happens, though, is that the hardware stores stop relying on selling commodity items and shift to selling expertise. If you’re looking to buy a shovel, a garden hose, or a cheap lawnmower, one goes to Wal-Mart. If one is undertaking an even moderately complicated project, one goes to Joe’s Hardware, pays a bit more for the goods, but gets Joe’s advice on what to buy, how to go about doing it, and so forth. You can’t get that at Wal-Mart. (The same logic applies to cameras, stereo equipment, and so on.)
Indeed, the bigger threat to mom and pop hardware stores is Home Depot and Lowes, not Wal-Mart, since those stores are staffed with competent people and they can sell more cheaply.
King Of Fools:
No, you can’t. “Tom Tarpy” and “Bill Jenkins” are residents of their respective towns and they can only make profits if they continue to stay in business. Wal-Mart is sufficently large, well-capitalized, and universal to make greater profits overall by closing the East Overshoe store when it fall below a certain gross and rebuilding a new one in a virgin market. Small local businesses simply can’t do this.
If the competition involved were only between all the Big Box retailers or only between all the small businesses the “invisible hand of the market” fantasy would roughly describe the results. The end of intelligent regulation (not all such regulation is intelligent, of course) is to keep Wal-Mart competing with players that are its own size.
But where a business has sufficient size and capital behind it, it can unfailingly drive out any small local competition simply by selling its goods or services at a temporary loss and will probably drive them out of business anyway because it can afford a vastly smaller net profit if it can sustain a large enough gross.
Joseph,
Have you actually been to a town that had a Wal-Mart in it? I’ve lived in several and have never seen one where there weren’t massive numbers of stores. That’s true in cities big and small and even small towns.
Go ask the company how many stores they have closed in little places like that.
I think you’ve got it backward, Joseph. You’re the one making claims which run counter to the experience of many. I, for one, have never seen Wal*Mart close one store without opening another nearby. If you claim this is happening despite our experiences, the onus is on you to prove your claim. Otherwise it’s just an unsubstantiated rumor, dangling in the wind without any basis in reality. Put some reality to it, pardner.
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